Defined-Benefit Plan
Definition of 'Defined-Benefit Plan'An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment. Investment risk and portfolio management are entirely under the control of the company. There are also restrictions on when and how you can withdraw these funds without penalties.Also known as "qualified benefit plan" or "non-qualified benefit plan." |
|
Investopedia explains 'Defined-Benefit Plan'This fund is different from many pension funds where payouts are somewhat dependent on the return of the invested funds. Therefore, employers will need to dip into the companies earnings in the event that the returns from the investments devoted to funding the employee's retirement result in a funding shortfall. The payouts made to retiring employees participating in defined-benefit plans are determined by more personalized factors, like length of employment.A tax-qualified benefit plan, shares the same characteristics of a defined-benefit plan, but also provides the beneficiary of the plan with added tax incentives. These tax incentives are not realized under non-qualified plans. |
Related Definitions
Articles Of Interest
-
5 Ways To Stretch Your Retirement Budget
Living comfortably can be easy if you follow a simple plan. -
Is Your Defined-Benefit Pension Plan Safe?
Your plan may not last in a rocky market. Find out whether your savings will be affected. -
The Danger Of A 401(k) Flameout
It looks like the 401(k) has failed, but what are the repercussions, and how can you protect yourself? -
What is the difference between qualified and non-qualified plans?
Qualified and non-qualified retirement plans are created by employers with the intent of benefiting employees. The Employee Retirement Income Security Act (ERISA), enacted in 1974, defines qualified ... -
The Defined-Benefit Plan's Many Problems
The shift in retirement plan schemes - from defined benefit plans to defined contribution plans - raises some important issues. -
401(k): An Accidental Solution To The Retirement Problem
The 401(k) is often a poor substitute for the defined-benefit plans it replaced, but there are steps you can take to make yours better. -
Who bears the investment risk in 401(k) plans?
Who actually bears the investment risk in a pension plan depends on the type of pension plan that is employed. In a broad sense, there are two benefit formulas that will calculate the pension ... -
The Demise Of The Defined-Benefit Plan
Experts are making bleak predictions for your post-work years. Be prepared and plan for your future. -
Retiring Early: How Long Should You Wait?
Maximize your Social Security benefits by choosing when you retire. -
The Pension Bill: A Wolf In Sheep's Clothing
Find out why the 2006 act may not be all it's cracked up to be.
Free Annual Reports